encore header

April 18, 2024

A.I. is a Tool NOT a Substitute

Are you tired of hearing about AI and how it’s going to change literally everything that we do every day? I certainly am.

I’ve always considered myself somewhat of an early adopter when it comes to technology. I’ve had Palm Pilots, Blackberrys, iPhones, iPads, Kindles, etc., all within the first iteration or two being released. I’ve also either adopted or tried to adopt any number of software products to help with productivity…think Evernote, OneNote, Outlook, MS Project, and many, many productivity programs, philosophies, and systems.

Now, social media is something I never got into. I realize the reach of social media is unmatched, but I’m half a century old now, so the worlds of Facespace, SnapSlap, InstaPic, Tick Tack, and others will not miss me, and I certainly don’t feel I need them. Amazingly, these devices, apps, and programs all have a couple of things in common. First, they are TOOLS. These tools can no doubt be very effective in helping us do our work as fundraisers and non-profit leaders. Second, not even one of these tools DOES THE WORK FOR US. It still takes a human being to set up and use the tool in the best possible way to work properly.

Enter Artificial Intelligence. Suddenly, this can do the work for us. A.I. can tell us when to call our donors, when to follow up after a conversation, and what specifically to ask the donor about based on our prior conversations—all without prompting from a human. It can write your emails, social media posts and even script phone calls. Among many other things, it can even write this column if I get a little lazy.

THIS IS HUGE!!!

As the world grapples with AI and how it will change virtually everything we do in our collective work, I believe it is still just a tool—an amazing, efficient, perhaps life-changing tool—that we must embrace and learn to deploy strategically. It might even help one write a column for a newsletter when one has trouble getting started (although not in this case…honestly).

Our work, the work of connecting donors and volunteers to organizations and causes they are passionate about, is at its core a business about people, human beings. Our work has always been, is today, and forever will be a relationship business. You’ve no doubt heard this many times, but it cannot be overstated.

I’ve seen some thank you notes written by A.I. and I’ve received some notes clearly written by a robot.  “Danger Will Robinson” (showing my age again). There is no replacement for that handwritten note or personal email to say thank you for your gift. No replacement for that phone call and invitation to lunch. And certainly, there is no replacement for that face-to-face meeting to learn more about those who support your cause and physically see their reaction to new ideas and priorities.

Most of us still cherish that phone call from a friend or colleague. We read the personal notes we receive. We still write on paper. We cash the paper checks mom sends on our birthday. I’m willing to bet many of us still read paper books; I do (again, my age?). In the end, it’s the IMPACT that really matters. The impact your organization has on humanity and the impact a donor or volunteer has on your organization.

I’m not hating Artificial Intelligence; we should embrace it and its many possibilities. Let the tool help you establish a communication cadence with your constituents, help you through a moment of writer’s block, or prompt you to send that email checking in on your top donor or volunteer. Just remember, A.I. can’t deliver impact. Stay in charge of the relationship, human to human. If we don’t, then I fear Sky Net will become self-aware (circa 1984).

kevin smyrl high res

From the desk of
Kevin Smyrl
Partner

DAF Regulations Loom

After years of concerns about how quickly Donor Advised Fund money reserved for charity gets distributed and whether DAFs need to operate more transparently, proposed new federal regulations are pending. Though the regulations would not create new requirements for how rapidly these funds distribute money, they do provide some new guidelines for what uses for DAFs are allowed by law.

The IRS released proposed new DAF regulations at the end of 2023 that would clarify what constitutes a DAF, who is considered a fund’s adviser, and restrictions on DAF disbursements.

  • The proposed regulations would identify certain distributions as taxable and declare that donors are not the only parties considered DAF advisers—the donors’ personal financial advisers are, too. This means the financial advisers, like donors, cannot receive any benefits from a DAF.
  • The regulations include the possibility that funds used to support lobbying or activities tied to political campaigns could lead to penalties for both the donor and the fund’s manager. And evidence suggests DAFs are commonly used to support lobbying.
  • A tax would be levied on the DAF totaling 20% of the distribution and another 5% charged to a participating fund manager.
  • Investment fees paid to financial advisers for their services would become impermissible “excess benefit” transactions. The proposed new rules would require the repayment of their compensation plus a 25% penalty.

More information can be found here.

Giving Remains Stable, Online Giving Rises

Most organizations saw very little year-over-year change in giving (-0.2 percent) in 2023. A report from the Blackbaud Institute found giving at the average organization remained well above pre-pandemic levels, with a five-year compound annual growth rate of 1.79%, illustrating a solid upward trend.

In addition:

  • Online giving continued to make gains, with 12% of giving occurring online in 2023 versus almost 8% in 2022.
  • Small organizations (revenue below $1 million) received nearly 17% of their donations from online sources versus nearly 10% for medium organizations and 12.5% for large organizations.


Based on a dataset of nonprofit organizations totaling more than $50 billion in fundraising revenue globally, the report, Blackbaud Institute Spotlight: 2023 Trends in Giving, can be found here (PDF). NPD, 4-17

31% of Foundations Make Gifts to Nonprofit Endowments

A Center for Effective Philanthropy report finds that fewer than a third of foundations fund nonprofit endowments, and these grants represent a very small fraction of their giving.

Key Findings from Funding Nonprofit Endowments: Foundation Perspectives and Practices

  • 31% of respondents fund nonprofit endowments. Of those,
  • 86% indicated that endowments made up fewer than 25%of total grants.
  • Among those that do fund endowments, the majority fund those of museums and performing arts organizations (56%) or direct services organizations (54%), followed by educational organizations (41%) and colleges or universities (39%).


Major criteria in the decision-making process for nonprofit endowment funding:

  • an existing relationship with the nonprofit (66%)
  • leadership’s strengths and potential (59%)
  • mission and goals (55%).


A third of foundations identified advancing equity as a primary concern,

  • with racial equity the type most often considered (82%), followed by health equity (63%), and gender equity and LGBTQ+ status (both 59%).
  • Only 4% of foundations that have never examined funding nonprofit endowments reported that they would consider doing so in the future.

 

Supported by the Robert Wood Johnson Foundation (RWJF), the report can be found here (PDF). NPD, 4-1

We Know the Performing Arts
For more than 35 years, Alexander Haas has been a fixture in the nonprofit community. We are honored to have worked with leading performing arts and cultural organizations across the country that help communities be a better place to live. Just ask our clients.

Face It: Arts Organizations are Different
Our services aren’t cookie cutter. We don’t operate with a boilerplate, merely changing names and locations. We craft each and every service we provide to match your organization’s unique needs, wants and abilities. We work hard and expect you to do the same. Together we can help you transform your arts organization, your fundraising, and the unique community you serve.

Whether your need is in Capital Campaign, Annual Fund Campaign, Major Gifts, Leadership Annual Giving, Planned Giving or all of the above, we take a fresh approach to nonprofit fundraising.